Background: Administrative health databases are a valuable research tool to assess health care utilization at the population level. However, their use in obesity research limited due to the lack of data on body weight. A potential workaround is to use the ICD code of obesity to identify obese individuals. The objective of the current study was to investigate the sensitivity and specificity of an ICD code-based diagnosis of obesity from administrative health data relative to the gold standard measured BMI. Methods: Linkage of a population-based survey with anthropometric measures in elementary school children in 2003 with longitudinal administrative health data (physician visits and hospital discharges 1992-2006) from the Canadian province of Nova Scotia. Measured obesity was defined based on the CDC cut-offs applied to the measured BMI. An ICD code-based diagnosis obesity was defined as one or more ICD-9 (278) or ICD-10 code (E66-E68) of obesity from a physician visit or a hospital stay. Sensitivity and specificity were calculated and health care cost estimates based on measured obesity and ICD-based obesity were compared. Results: The sensitivity of an ICD code-based obesity diagnosis was 7.4% using ICD codes between 2002 and 2004. Those correctly identified had a higher BMI and had higher health care utilization and costs. Conclusions: An ICD diagnosis of obesity in Canadian administrative health data grossly underestimates the true prevalence of childhood obesity and overestimates the health care cost differential between obese and non-obese children.